MONTREAL, QUEBEC -PRO REIT (the “PRO REIT” or “REIT”) (TSX VENTURE: PRV.UN) is pleased to announce the conditional acquisition of four commercial properties for a purchase price of $ 40.4 million With an implied weighted average capitalization rate of approximately 7% and leases with a weighted average term of approximately six years (collectively, “acquisitions”). The acquisitions will be partially funded from proceeds from the sale of two industrial properties located in Etobicoke, Ontario, for a consideration of $ 22.3 million, representing a capitalization rate of approximately 6% on sale .
“We are very pleased with these transactions, which together will enable the addition of more than $ 20 million in new high-quality assets to our portfolio. The gross leasable area of the REIT’s portfolio will increase by approximately 250,000 square feet at the close of operations, which will allow us to increase the quality, size and diversity of the portfolio’s cash flow, “said James W. Beckerleg , President and Chief Executive Officer of the REIT. We believe that the new assets being acquired are of superior quality to the older properties sold and will produce higher returns and will harmonize very well with the overall objectives of our portfolio. “
Details of Acquisitions
The four properties under development include a 90,600 square foot retail and light industrial complex located in Atlantic Canada and two 456,000 square foot industrial properties located in Woodstock, Ontario.
Buildings located in Woodstock, Ontario
The PRO REIT entered into a conditional binding agreement to acquire two high-quality light industrial properties in Woodstock, Ontario, for a total purchase price of $ 30.0 million (excluding closing costs ). The buildings, constructed in 2007 and 2009, are fully leased, with ceiling heights of 28 and 30 feet, respectively, strategically located near major markets in Canada and the United States. The properties are fully leased to seven high-quality national or multi-national tenants through excellent lease commitments and leases ranging from 26,000 square feet to 132,000 square feet.
The buildings will be financed by (i) $ 16.7 million in mortgage assumption, (ii) by issuance of $ 7.2 million Class B LP Units Of the REIT LP Partnership (“Class B Units”), a subsidiary of the REIT, at a price of $ 2.25 per unit and (iii) cash from the net proceeds from the sale of the two industrial properties As set out below. The Class B Units are economically equivalent to and are exchangeable for Trust Units of the REIT on a one-for-one basis and are accompanied by Special Voting Units, which entitle their holders to Vote equivalent to those of the Trust Unitholders of the REIT.
The Woodstock Real Estate Vendor is a limited partnership in which two trustees of the REIT, Peter Aghar and Shenoor Jadavji, have a total economic interest of approximately 25%. Since the two companies which are respectively controlled by Mr. Asghar and M me Jadavji control seller because of their ownership of the general partner of the seller, the transaction to acquire the Woodstock property should be a “related party transaction” within the meaning of Regulation 61-101 respecting protection of minority Security holders in special transactions ( “MI 61-101”) (the “acquisition Woodstock”). See “Transaction Issues” below.
Buildings in Atlantic Canada
The PRO REIT entered into a binding conditional agreement to acquire an independent retail property located in Saint John, New Brunswick. The building, which was built in 2016, is entirely occupied by a provincial Crown corporation under a long-term lease with a remaining term of approximately 15 years. The purchase price of approximately $ 4.8 million (excluding closing costs) is expected to be settled through new mortgage financing totaling approximately $ 3.7 million and Of cash generated from the net proceeds from the sale of the two industrial properties.
The REIT also signed a letter of intent and expects to enter into a binding conditional agreement to acquire a light industrial property for $ 5.7 million. The well located building is entirely rented to a good quality tenant. More information will be provided later.
“These operations are perfectly aligned with our strategy of acquiring high-quality commercial buildings in stable suburban markets. “Through these four acquisition projects, we are continuing our expansion into the Maritimes, while moving into the strategic suburban markets of southern Ontario,” said Mr. Beckerleg. Acquisitions also allow us to further diversify our portfolio through the significant increase in our gross leasable area in the industrial segment of the market. “
Sale of Industrial Buildings in the Greater Toronto Area
PRO REIT is pleased to report that it has entered into a binding agreement to sell two industrial properties in Etobicoke, Ontario, for gross proceeds of $ 22.3 million, corresponding to a capitalization Approximately 6% (the “Sale Transaction”). The two properties, acquired by the PRO REIT in June 2015 and with a total capital cost of $ 20.1 million, are subject to an opportunistic sale, Approximately $ 2 million on their capital cost and a $ 0.6 million gain on their 2016 IFRS values. The sale transaction will generate more than $ 10 million in available cash, all of which should be used to settle the purchase price, Purchase of acquisitions. The two buildings, which were leased in their entirety, represent approximately 298,000 square feet of gross leasable area. The sale transaction is expected to close in June 2017 and be subject to customary closing conditions.
Acquisitions are subject to due diligence in accordance with the normal operating procedures of the REIT and the Acquisition Agreements contain or will contain closing conditions, including the funding and approvals required by the REIT As well as the usual representations and warranties found in acquisition agreements negotiated between arm’s-length buyers and sellers.
A special committee of independent trustees of the REIT is responsible for overseeing the process to be followed by the REIT and its advisors in connection with the Woodstock Acquisition. The principal terms of the Woodstock Acquisition were unanimously approved by the Independent Trustees of the REIT. The closing of the Woodstock Acquisition is subject to certain conditions, including (i) due diligence to the satisfaction of the REIT in respect of the Woodstock properties, receipt of an estimate independent of the fair market value of the properties prepared by An independent appraiser under the supervision of the Special Committee, (ii) obtaining approval from certain regulatory authorities, including the TSX Venture Exchange, (iii)
About PRO FPI
PRO REIT is an unincorporated open-ended real estate investment trust established pursuant to a declaration of trust under the laws of Ontario. The PRO REIT was established in March 2013 to hold a diversified portfolio of commercial properties in Canada, primarily focused on primary and secondary markets in Quebec, Atlantic Canada and Ontario, and selective expansion in the Western Canada.
This press release contains forward-looking statements within the meaning of applicable securities legislation. Forward-looking statements are based on a number of assumptions and are subject to a number of risks and uncertainties, many of which are beyond the control of the PRO REIT and may cause actual results to differ materially from those expressed in Or are implied in such forward-looking statements.
Forward-looking statements contained in this release include statements regarding the timing and expected completion of the Acquisitions and the Sale Transaction, the impact of the Acquisitions and the Sale Transaction on the REIT’s financial performance, The REIT’s ability to enter into a binding agreement to acquire one of the properties located in Atlantic Canada, the use of the net proceeds from the sale transaction and the ability of the REIT RE Business and growth. The objectives and forward – looking statements of the PRO REIT are based on certain assumptions, including that (i) the PRO REIT will obtain financing on favorable terms, (ii)
The forward-looking statements contained in this press release are expressly qualified by this cautionary statement. All of the forward-looking statements contained in this press release are made as of the date of this press release. The REIT RE does not undertake to update the forward-looking information, including, without limitation, any new information or future events, unless required to do so by law.